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June 29, 2017 False Claims Act Legal News

Health First Entities Agree to Pay $3.5 Million to Resolve False Claims Act Lawsuit

Health First, Inc. and related entities have agreed to pay $3.5 million to resolve a False Claims Act lawsuit filed in 2014 by a whistleblower (the “relator”). The related entities include Health First, Inc., Health First Health Plans, Inc., Health First Medical Group, Holmes Regional Medical Center, Palm Bay Hospital, Cape Canaveral Hospital, Melbourne Same Day Surgery Center, and Melbourne GI Center (collectively, “Health First”).

Health First operates an extensive healthcare system on Florida’s Space Coast and promotes itself as providing “Central Florida’s only fully integrated health system.”  Through various wholly-owned subsidiaries, Health First operates four hospitals and a hospice, offers commercial and Medicare health insurance policies, and administers a large network of outpatient and other medical facilities.

The lawsuit alleged, among other things, that Health First illegally induced referrals of patients to various Health First-owned hospitals by offering kickbacks to physicians in the community who practiced with Melbourne Internal Medicine Associates. P.A. (“MIMA”). The case is captioned U.S. ex rel. John Doe v. Health First, Inc. et al., Case No. 6:14-CV-501-RBD-DCI (Middle District of Florida, Orlando Division).  

Specifically, relator alleged, inter alia, that in violation of the Anti-Kickback Statute (“AKS”), the Health First Defendants engaged in a scheme to vastly increase the number of referrals they received from MIMA physicians by providing remuneration and other incentives for those referrals. This scheme is alleged to have included the following conduct:

  • (i) granting MIMA the ability to invest in and own portions of highly profitable subspecialty healthcare facilities (Melbourne Same Day Surgery Center and Melbourne GI Center) in proportion to its ability to refer patients and to induce such referrals;
  • (ii) paying MIMA physicians exorbitant fees as Medical Directors of its outpatient surgery center, hospital programs and hospice center for little or no work performed and without any documentation;
  • (iii) offering MIMA physicians exclusive free services, such as the use of hospitalists;
  • (iv) using HF’s insurance subsidiary, Health First Health Plans (HFHP), to induce referrals by granting MIMA nearly exclusive rights to bill and be reimbursed by the HFHP, and later, by agreeing to close HF’s own radiation therapy center at HRMC, in exchange for referrals; and
  • (v) ultimately buying the entire MIMA practice, and its ownership in the subspecialty centers MSDS and MGIC, for exorbitant sums greatly in excess of fair market value.

The Stark Statute prohibits a physician from referring Medicare and Medicaid patients for certain “designated health services” (“DHS”) to an entity with which the physician has a “financial relationship” when that referral results in a claim on or payment by the government, unless an exception applies. 42 U.S.C. § 1395nn(a)(1)(A).

Relator alleged that, in violation of the Stark Law, Defendant MIMA physicians consistently referred patients to: a) an outpatient surgery center in which it held ownership interests (Melbourne Same Day Surgery Center) and b) a gastrointestinal center (Melbourne GI Center) in which it held ownership interests, knowing that those facilities would and did bill government insurance programs individually for those designated health services and not as part of a composite rate.

Finally, relator alleged that the Health First Defendants violated the False Claims Act by billing for medically unnecessary blood transfusions and other blood services by requiring that those services be done on an inpatient basis.

In settling this matter, Health First expressly denied relator’s allegations.

Separately, MIMA was also a defendant in this case and settled the matter as well.